Sister Golden Smokes Water

The Paul Truesdell Podcast

Here are ten general reasons why they might not be a suitable investment for most individuals:

1. Lack of Liquidity: Non-traded REITs typically lack a liquid market, making it difficult to sell shares quickly or at a fair market price.
2. High Fees and Expenses: They often come with higher fees, including upfront sales commissions, management fees, and other expenses, which can erode potential returns.

3. Valuation Challenges: The valuation of non-traded REITs can be opaque and complex, making it challenging for investors to determine the true value of their investment.

4. Limited Transparency: These investments might lack transparency in terms of their underlying assets and financial performance, leaving investors with less information to make informed decisions.

5. Long Lock-Up Periods: Investors might be locked into their investment for several years before an exit option becomes available, restricting their access to capital.

6. Uncertain Income and Distributions: Non-traded REITs might offer irregular or unpredictable income distributions, which can be challenging for retirees relying on consistent cash flow.

7. Volatile Performance: Non-traded REITs can be subject to fluctuations in property values and market conditions, potentially leading to volatile performance.

8. Interest Rate Sensitivity: They can be sensitive to changes in interest rates, which may negatively impact their returns, especially in a rising rate environment.

9. Potential for Conflicts of Interest: There might be conflicts of interest between the REIT's management and investors, affecting decision-making and potentially harming investor returns.

10. Tax Complications: Non-traded REITs can have complex tax implications, including the potential for higher taxes compared to other investment options.

For retirees specifically, here are three additional reasons:

1. Income Reliability Concerns: Retirees often seek stable and predictable income streams, which might be uncertain or inconsistent with non-traded REITs.

2. Limited Time Horizon: Retirees may have a shorter investment horizon, and non-traded REITs often require a long-term commitment, which might not align with their financial goals.

3. Increased Need for Liquidity: Retirees might have higher unexpected expenses or healthcare costs, making access to liquid funds more critical, a need that non-traded REITs may not fulfill easily.